Key facts
- Modal Labs is nearing a $750 million funding round led by Accel.
- The funding round would value Modal Labs at $15.75 billion.
- Modal Labs' valuation would more than triple from its previous $4.65 billion valuation.
- The company's annualized revenue surpassed $300 million as of May.
- Modal Labs' CEO is Erik Bernhardsson and CTO is Akshat Bubna.
AI inference infrastructure provider Modal Labs is reportedly in advanced talks to close a $750 million funding round that would value the company at $15.75 billion, according to a source familiar with the matter. This valuation represents a significant increase from the $4.65 billion valuation Modal Labs achieved just four months ago during its previous $355 million fundraising.
The surge in valuation comes amid a booming demand for AI inference services, which are essential for running trained AI models to generate outputs, particularly for those utilizing open-source models. Other startups in the inference space are also seeking substantial capital infusions at higher valuations; Baseten is reportedly nearing a funding round at a $26 billion valuation, and Fireworks and Fal are also in discussions for new rounds that would significantly boost their valuations.
Despite rapid revenue growth, inference startups often face thin margins due to the high costs associated with acquiring or leasing compute power. Fireworks, for instance, announced in July that its annualized revenue had reached $1 billion. Multiple inference-focused startups are anticipated to hit this revenue milestone by the end of the year.
Modal Labs, founded in 2021 by CEO Erik Bernhardsson and CTO Akshat Bubna, allows developers to train AI models and manage compute-intensive workloads without the need for self-managed servers. The company's customer list includes Cognition, Suno, Ramp, and Substack. As of May, Modal Labs had reported surpassing $300 million in annualized revenue.
Earlier in the year, Modal Labs was involved in a security incident where a customer's data was compromised as part of a hacking campaign targeting Hugging Face. At the time, CTO Akshat Bubna stated that the breach originated from a flaw in the customer's code, not Modal's systems, and that the Modal platform itself was not compromised.